by Steve Laube
Today’s Cinco de Mayo celebration should be renamed Cinco de Grande. Last week’s news that HarperCollins is buying Harlequin caused quite a stir in the industry.
It had long been wondered if current owner Torstar, a Canadian media company that owns a number of properties, would do something with Harlequin. The primary reason is that each of the past four years has seen a percentage decline in Harlequin sales revenue.
Coming on the heels of last month’s announcement that the Baker Publishing Group was buying Regal Books has some wondering if the sky is falling. Or, as is more likely, is this just “normal” business consolidation?
Let me address each purchase in order and bring an agent’s perspective to the news.
HarperCollins and Harlequin
I’ll admit, this caught me by surprise, but it shouldn’t have. There are a few economic factors that drove the wisdom of this acquisition.
1) The price was right. Harlequin has been owned for 39 years by the Canadian company that also owns many prominent Canadian newspapers. The newspaper group is deeply in debt and so the sale was as much about generating cash to reduce that debt.
The price for the company is $455 million Canadian…and the Canadian dollar has been the weakest it has been in several years compared to the US Dollar and also the British Pound. Put all these things together and it works for everyone. The conversion rate puts the purchase price at $415 million US.
When Newscorp, the parent company of HarperCollins, separated the financials of the publishing division from the rest of the corporation in their annual reporting, it meant that segment’s performance became visible to investors. Consequently that division needs to grow dramatically and visibly. [Thank you Dan Balow for this analysis.]
2) HarperCollins needs to grow to compete. After Penguin and Random House merged last year the new PenguinRandomHouse company has about 40% of the traditional publishing market. That is sizeable competition.
Stockholders like to see growth in revenue and bottom line dollars. The pressure in this regard is enormous. Harlequin generates about $350 million a year in sales which will add 20% to the HarperCollins annual revenue stream – now projected to be $1.7 billion. By comparison Penguin Random House is pegged at around $4 billion in revenue.
2) Publishers see the need for direct to consumer business. Harlequin currently publishes 110 new titles per month. That is over 1,300 new books per year. A large part of their sales is through their direct to consumer mailing programs. This has what made them unique in the industry. No one does it better. While some titles make it to the shelves, they stay in the retail environment for only a month until the next books in the line take their place. We jokingly say that some Harlequin titles have the shelf-life of a banana.
But the direct business is lucrative in that there are limited discounts necessary and the books are not returned…a guaranteed sale. While it is very expensive to administrate the club programs they are still a profitable venture.
If HarperCollins can tap into the secrets that make this kind of program work and leverage their own significant group of authors and backlist titles, the sky is the limit.
Others have also mentioned the International sales that Harlequin generates. It could be that those sales channels can help open up sales for HarperCollins which currently has a very U.S.-centric sales focus.
What Does This Mean for Authors
Harlequin’s Love Inspired and Heartsong lines publish 20 new romance novels each month in the contemporary, suspense, and historical categories. Since they recently expanded my numbers may be a little off, but you get the general idea. 240 new titles per year written with the Christian reader in mind. This is significant. It makes them the single largest publisher of Christian fiction in the industry by sheer number of annual titles. But, as mentioned above, most are sold via the direct to consumer clubs and not in the retail environment per se. We have 29 authors who currently write or have written for the Harlequin lines.
The press releases indicate that nothing will change, at least initially. And I can believe that from an editorial perspective. For now the plans will remain stable. The efficiencies usually sought in a sale are in back-room functions like accounting and production. But with the sheer number of titles being produced I suspect the HarperCollins management will be reluctant to make wholesale changes initially.
One area suggested to change is warehouse distribution. In the past years HarperCollins has been systematically reducing warehouse space and instead have partnered with their printer for such functions. This may or may not be something easily shifted because of the direct-t0-consumer element of Harlequin’s operations.
For now I suggest authors wait and see. We agents wonder if the contract terms will eventually change as well as other areas of difference between the Harlequin and HarperCollins business practices.
Baker Publishing Group and Regal Books
On a much smaller scale Baker has bought all the assets of Regal Books. This means all the book titles, inventory, and their accompanying contracts. Instead of adding Regal to the list of Baker imprints, the Regal name will just go away. Every one of the 600+ titles in the sale will be placed with a Baker imprint that best fits the content of the book and that imprint’s focus. None of those assignments have been announced and will not be until the sale is finalized this Summer. For example, Regal Books that have a stronger Charismatic flavor to them would best fit with Baker’s “Chosen Books” imprint.
What Does This Mean for Authors?
As always it is a wait and see. It was no secret that Regal was having some economic challenges these past few years when the economy tanked. Having the resources of The Baker Publishing Group behind the books should make a huge difference.
In addition Baker has shown considerable acumen in increasing the sales of their backlist using ebook strategies. This should begin making an impact in 2015 and beyond.
The downside is that none of the staff at Regal will be retained. And we lose yet another place to sell our author’s books. We will miss working with Stan Jantz and Kim Bangs and the rest of the Regal staff.
Feel free to ask any questions related to these events in the comments below. I will try to answer them if possible.
Hi Steve,
What does it mean for unpublished authors? Do we write to target Love Inspired or aim for the longer books?
Thanks!
Jackie,
Nothing changes editorially. If you are writing a novel that targets Love Inspired’s various lines continue to do so.
Remember the sale won’t go through until regulatory details are ironed out. Then it takes time for management to find “efficiencies.”
Plus everything out there says that Harlequin isn’t broken per se, so there isn’t a need to fix it.
Steve
Thanks, Steve!
Yep…convinced. Have an agent! The waters are muddy in this publishing world. Someday I will have an agent navigate for me! The dream is alive…
Steve, It seems that the watchword for authors in all this is “wait and see.” Although we didn’t see a radical change when HC bought Zondervan and then Thomas Nelson, those changes have begun to show up. I suspect the same thing will happen as Harlequin is folded under the HC umbrella. Thanks for keeping us posted…and not engaging in “the sky is falling” speculation yet.
I am very sad that the Regal staff will not be retained. Steve, is this common, and will they likely be snatched up by other Christian publishing companies?
As a pre-published novelist, I do tremble a little when I hear of these changes. I know it makes it just a little harder for me to break into the biz. But it also means I (and other writers like me)have to work hard to be the best of the best in craft.
Thanks for helping make all this information more clear.
Since Regal is located in Southern California and is the last of the publishers of that size in that region, it makes it tough for the staff, editorial and otherwise, to be “snatched up by other Christian publishing companies.”
While some houses are amenable to tele-commuting it rare to find that outside of the editorial departments. Unless a Regal employee is able to relocate it is tough to see any sort of wholesale shifting of personnel.
Plus, every job being done at Regal is being done at the other publisher already. Which is why Baker is not retaining anyone.
Anyone who has experienced anything like this in other industries know how tough this is for those who were doing their jobs well but are still headed for the unemployment line.
Steve
Thank you for your analysis. Interesting from one of those Harlequin writers.
I have been waiting to get your take on this. Thank you for helping me get a grasp on what this means to the publishing world.
Thanks, Steve, for keeping up us to date on publishing changes, as always!
Steve, I was wondering what the impact of the Harlequin sale would mean for authors. I always appreciate your perspective on the changes in the publishing industry. I was thinking about targeting my next book toward Love Inspired. What kinds of things do I need to consider in light of this sale?
Jeanne,
No new “considerations.” Write the most amazing book you can and go-for-it!
To target Love Inspired the best way? Follow the example of one of my clients. Ginny Aiken is a long time veteran of the publishing wars. She has published nearly 30 novels, including some with Love Inspired.
After a haiatus and wanting to publish with Love Inspired again she set out to do her research. She bought and read at least 100 Love Inspired novels. She studied what worked and what the common elements were in each story. She also figured out which editors worked on which books because she knew that certain editors like certain types of stories.
Then she began to put together her storyline. Meanwhile I talked to her previous Love Inspired editor and said that Ginny was on the track to submit a new story. The editor said she looked forward to that.
Ginny worked hard on this synopsis and the sample chapters. We talked about it and felt confident. I sent the proposal to the editor and it sold the next week.
THAT is what you should do if you want to write for Love Inspired. Understand the genre, thoroughly. Understand the unique nature of the Love Inspired stories. Then come up with the perfect proposal…and it is likely that success with follow.
Steve
Steve, thanks for the in-depth answer. I truly appreciate it and I’m taking it to heart!
Steve – Thank you for the news, insight and wisdom.
I’ll admit when I first read your article my heart sank. When I joined the ACFW in 2011 and then began to correspond with several key writers who graciously became mentors – one, Margaret Daley suggested I consider Harlequin Love Inspired as a potential publisher. I purchased a dozen titles one month and fortunately one was Margaret’s A LOVE REKINDLED in the TOWN CALLED HOPE series. It opened a whole new series of doors and windows to contemplate writing for the line.
In 2012 I attended the conference in DFW and one of my best appointments was with Senior Editor Melissa Endlich. I knew my writing had some challenges to overcome but with her encouragement and interest I’ve gone on to read and study about 125 titles [65% Contemporary & 35% Historical]. I wrote my first contemporary (first draft) in 10 days and then about three months experimenting with a Historical. To be honest I love the publisher and line. So nearing a submission this year the news initially was tough to grasp – but your insight and responses since (here) suggest I stay on course and continue to follow into a possible career with the HLI lines.
I will share this and hope not to take up too much room here in the process: I’ve seen this before in other industries. Some know I come from a Media background spending a combined 15 years in Broadcast Radio, 4 years in Broadcast Television and 11 years in Media Production (film, documentaries, advertising, digital cinema & industrial/nonprofit features). What’s happening Publishing has also transpired in all media and continues to do so all too fast and often.
I entered radio in the mid 1970s. By the mid 1980s AM stations in particular were going dark (off) and to save the industry the Reagan administration and FCC began to relax ownership laws. What the move did was cause family and single ownerships to eventually sell out and gave rise to the corporate and later mega companies to consolidate and sometimes control given markets. In the late 1980s Desktop Publishing began to drive many printers into failure and eventually out of some aspects of what had been decades of a printing business. In the 1990s it was the same for multimillion dollar production companies displaced by independent producers and nonlinear editing and Television by the late 1990s the same path as radio in the 80s with solo or owners unable to make the $5-10 Million dollar conversation to Digital and HDTV.
In a post 911 2001 world broadcast and electronic media took massive hits. Clients did more with less people and budgets and electronic media transformed by technology did more with fewer people. In the early first decade of the 2000s Newspapers and Magazines hard pressed by economics and technology also consolidated, downsized, merged or went out of business. But it wasn’t limited to media… retailers followed suit, as did banks, savings and loans, car dealers, airlines, movie theater exhibition, and even the once Teflon Medical industry turned not to be immune in this post 2008 age of Obamacare/Health Care Act. So the spoils of the wars have, in some cases, found new ownerships in substantially larger economically viable companies. Perhaps Harlequin has gone to the BEST of the lot in the very financially viable ownerships.
HC seems strong. Dominant. Viable. The Christian publishing companies its purchased remain strong, dominant and viable. Perhaps Harlequin in the HC stable has as much to offer as to gain in the long run. I hope so. I will continue in my MS layering/editing and pending all the editorial names we know continue on as well – we may see better things to come as a result of the economic stability within the new owners. Again, I hope so.
Thank you for the truth and the encouragement. Of both I cannot seem to get enough.
Once again, Steve, thank you for distilling down a major publishing event/shift/change into what it might mean from a writer’s POV. Appreciate it so much.
Thank you for sharing your insight, Steve. I greatly enjoyed reading your post.